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Tuesday, April 04, 2006 

Vol. 2 No. 15

CAR Part III: Wisdom at the Roundtable
Plus: Look for the Podcast Discussion with JD Power’s Charlie Vogelheim in coming days

The last day of the Conference of Automotive Remarketing (CAR) in Las Vegas included two panels of particular interest to almost any organization that consigns or remarkets vehicles. The first, “Trends and Influences of Future Values” was moderated by Charlie Vogelheim and filled with industry experts (representatives from RVI, Automotive Lease Guide, and my old friend Tom Webb, the Chief Economist at Manheim Auctions. It dealt with one of the “hottest” issues in remarketing -- where used car residual values are headed. The final panel of the program, “How Consignors Can Improve Auction Take-Home Dollars,” held everyone’s interest as well, even being the final presentation. The panel was moderated by my friend Steven Houston, National Vice President of Vehicle Remarketing at WFS, as well as the current President of the International Automotive Remarketers Alliance, along with panel guests representing some of the brightest physical auction guys in the industry.

Hearing it First Hand:
Our own “Remarketing Advisory Panel” Meeting

Although this year, the 11th annual CAR show finished up mid-day on Friday, March 10th, the excitement kept right on going for us at Driveitaway as we held our first Remarketing Advisory Panel meeting. Devoted exclusively to the issues of Remarketing, we focused on the current wants and needs of fleet managers, with the purpose of implementing future improvements. I have been very lucky over the years to know and be in regular contact with some of the best, most knowledgeable and most esteemed fleet folks in the business, and am grateful that I could get some old and new friends to take a few hours out of a pleasant Friday afternoon in the playground called Las Vegas to discuss their business with us. We had some of the industry’s best around the table, in a group that included:

(Clockwise, from left):
Suzanne Fischer, Dreyer’s Grand Ice Cream
Mike Antich, Automotive Fleet
John Possumato, Driveitaway
Gage Wagoner, Philips Medical Systems (named Upstream Remarkter of the Year the previous day)
Elsie Lucia, The Estee Lauder Companies, Inc.
Rod Smith, Arelco Inc. (Alamo/National Car Rental Licensee)
Patsy Brownson, CAFM, Cox Enterprises, Inc.
Frank Memolo, Panasonic Corporation of America

We were also privileged and grateful that my very good friend, Mike Antich, the CAR Conference Co-Chairman and the Editor and Associate Publisher of Automotive Fleet Magazine (the bible of the fleet industry), took the time, right after he finished directing the most successful remarketing conference in history, to moderate this Remarketing Advisory Panel.

#1 on the Agenda: Vehicle Pricing

Taking our cue from the “Future Values” panel at CAR, first on our agenda was a discussion of used vehicle remarketing pricing. For the commercial fleet end of the business, this topic is uniquely appropriate, as for the first time commercial fleet operators are looking to expand or migrate from using just one benchmark guidebook not widely used in the rest of the used car industry, to extracting many different guides’ prices to establish the proper resale price for end-of-term. The basic question for these fleet managers is, “how should I price my car when selling it?” What seems a simple question, is indeed, complex, and took almost half of the time slated for the panel discussion – in fact, we had to consciously move the discussion on to another topic, as it could have easily taken up all the time allotted and more.

Who sets pricing? How does a fleet leasing company derive a suggested price? How confident can we be in a pricing formula? What happens if the suggested vehicle prices received are too high or too low compared with the actual results after the remarketing sale? These questions evoked many interesting responses. The major takeaway from discussion was that fleet managers are very sensitive as to pricing issues, and not only want, but require, more guidance and comparisons in this area, and ideally, want the ability to use an understandable pricing tool themselves, rather than having to depend on leasing companies or external guidebooks. We hear you at Driveitaway, and some of the innovations we will roll out over the coming months are specifically designed to satisfy this need, as we have heard various strains of this before from different clients.

Patsy Brownson and Frank Memolo explore a point during the discussion.

A related issue of discussion was that of benchmarking and performance reports. We talked about the used vehicle sale benchmarking reports fleet managers currently receive from vendors (it’s curious that every fleet management company and remarketing organization reports back to fleet managers that their cars performed average or slightly above average against a basket group of sample vehicles, but never below the norm). We also discussed what form and content a used car sale performance report should possess; and whether benchmarking against peers or individual performance against prior cycle and sales history is most beneficial. As we are developing our own set of benchmarking performance reports for our commercial clients on the net increase in realization per vehicle directly attributed to an upstream (v. downstream) sale, this input was very useful.

The final broad topic we covered dealt with new replacement vehicle delivery/end-of-term vehicle collection issues. It’s a fact that a new replacement vehicle can be tracked all along the order/build/ship process with status reports produced by each manufacturer for the fleet client…that is, until the time the newly built vehicle leaves the plant. The time at which a new vehicle arrives and is ready for delivery at the delivering franchise dealer however, cannot be directly traced by the manufacturer or subsequently, the fleet manager, and the fleet manager is dependent upon the actual delivering dealer to report new vehicle arrival, and readiness for delivery. (Did you follow that?) Since the availability of the used vehicle (which is dropped off at the time the corporate driver picks up his replacement vehicle at the dealer), is directly contingent upon this new vehicle pick-up, this unknown factor is sometimes referred to as the “black hole” period for new vehicle delivery/end-of-term used vehicle collection. We’ve all heard the horror stories of used car drop offs being lost for months and in some cases over a year, because the new vehicle delivering dealer either didn’t alert someone to its existence or it somehow fell through the cracks. Things have definitely gotten better over the last few years, but in a lot of cases, this end-of-the-remarketing process is still highly dependent on the quality and the attentiveness of each new vehicle delivering dealer and, is still the most people-dependent part of the process as it requires phone calls and follow-up.

In conclusion, the Panel participants all presented interesting information, experiences and viewpoints; the discussion was enlightening, and we could have gone on for hours without beginning to exhaust the issues. Suffice it to say the first Driveitaway Remarketing Advisory Panel was considered by all to be a great success, and we are already planning our next one for the beginning of May, in coordination with the National Association of Fleet Administrators (NAFA) annual Conference and Exposition in Orlando.

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